Any current/future new fundraising through debt or equity?

No specific current or future fundraising plans through debt or equity are mentioned in the transcript. When asked about investment from Gtake in the subsidiary, the management indicated uncertainty regarding the timing and value of such investment, suggesting no imminent fundraising there. CAPEX plans are underway with internal funding: ₹50 crores plus for the current year and ₹28 crores planned for expansions in FY '24, with no mention of external financing. Management stated many plans are dynamic, and they will update once finalized, but no explicit mention of raising funds through debt or

Any current/future capex/capital investment/strategic investment?

The consolidated CAPEX plan for the current year (FY '24) is over ₹50 crores, and they are on track to complete this investment. The bulk of the investments will be in new businesses; standalone business CAPEX will mainly be for maintenance. FY '25 CAPEX planning is underway but still dynamic; final figures expected in about three months. For the SGEM (subsidiary) business, the CAPEX plan was ₹28 crores for FY '24, with about ₹5 crores spent in H1 and the balance expected by March 31. Capacity expansion in SGEM is ongoing and on track, aiming to utilize the full planned CAPEX. Future CAPEX and

Future growth expectations in sales/revenue/volumes?

Sterling Tools aims to grow faster than the industry despite industry growth slowing to about 1%. They expect moderate top-line growth in fasteners and electric vehicle (EV) segments, with some temporary dips due to policy changes and product realignment. Partnership with Hyundai Kia Group is expected to contribute to future growth, though exact FY'25-'26 guidance is not provided yet. Three-wheeler EV volumes are decent with five active customers, while LCV EV product launches are anticipated soon. Capacity utilization is around 70%, with expansion plans, especially in the MCU segment, targeti

Future growth expectations in earnings/operating earnings/profits/EPS?

Sterling Tools expects standalone business EBITDA margins to approach around 15%, with current margins at 12.5% on a consolidated basis. The company anticipates maintaining or marginally improving their current revenue run rate into H2 FY '24 and beyond. Growth in FY '25-'26 is uncertain, particularly with the new partnership with Hyundai Kia Group, as product acquisitions are still evolving. Non-fastener subsidiary business revenue grew 111% in H1 FY '24 but faces challenges due to subsidy changes affecting EV volumes; strong growth is still targeted but not 2x as earlier projected. C

Current/ Expected Orderbook/ Pending Orders?

Sterling Tools currently has 16 active customer contracts with vehicles sent for homologation using their products. There are about 40 additional engagements with prospective customers, indicating a healthy pipeline. Not all contracts are in high-volume production; some are in homologation or trial marketing phases. The company has multiple contracts with two-wheeler OEMs, including large players like Ola and others with varying volumes. They are also negotiating with large Tier-1 customers for export cycles, though visibility remains slow. The company tracks the number of contracts and custom

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Sterling Tools LtdQ3 FY23Auto Components

Sterling Tools Ltd Q3 FY23 Earnings Call Analysis

Revenue, margin, capex, fundraise and order book outlook from management commentary.

Price: ₹275P/E: 29.0Market Cap: ₹951 CrSector: Auto Components

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

N/A

Order

N/A

Capex

Yes

1 of 3 growth signals are positive — mixed outlook.

Full analysis

Revenue guidance

Category 3

→Sterling Tools aims to grow faster than the industry despite industry growth slowing to about 1%.
→They expect moderate top-line growth in fasteners and electric vehicle (EV) segments, with some temporary dips due to policy changes and product realignment.
→Partnership with Hyundai Kia Group is expected to contribute to future growth, though exact FY'25-'26 guidance is not provided yet.
→Three-wheeler EV volumes are decent with five active customers, while LCV EV product launches are anticipated soon.
→Capacity utilization is around 70%, with expansion plans, especially in the MCU segment, targeting increased output.
→Export opportunities are being explored but currently yield slow visibility.
→Growth in non-two-wheeler revenues reaching 50% by FY’25 is unlikely due to evolving industry timelines.
→Steady-state ROCE expected between 15%-20%, with MCU business margins steady at 7%-9%.

Margin guidance

Category 3

→Sterling Tools expects standalone business EBITDA margins to approach around 15%, with current margins at 12.5% on a consolidated basis.
→The company anticipates maintaining or marginally improving their current revenue run rate into H2 FY '24 and beyond.
→Growth in FY '25-'26 is uncertain, particularly with the new partnership with Hyundai Kia Group, as product acquisitions are still evolving.
→Non-fastener subsidiary business revenue grew 111% in H1 FY '24 but faces challenges due to subsidy changes affecting EV volumes; strong growth is still targeted but not 2x as earlier projected.
→Capacity expansions, especially in the MCU segment, are underway to support future growth.
→The company aims for steady-state ROCE in the 15%-20% range.
→Overall, Sterling Tools is committed to outpacing industry growth at standalone and consolidated levels through customer acquisition, higher product content, and new product development.

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Fundraise plans

→No specific current or future fundraising plans through debt or equity are mentioned in the transcript.
→When asked about investment from Gtake in the subsidiary, the management indicated uncertainty regarding the timing and value of such investment, suggesting no imminent fundraising there.
→CAPEX plans are underway with internal funding: ₹50 crores plus for the current year and ₹28 crores planned for expansions in FY '24, with no mention of external financing.
→Management stated many plans are dynamic, and they will update once finalized, but no explicit mention of raising funds through debt or equity at this time.

Order book

→Sterling Tools currently has 16 active customer contracts with vehicles sent for homologation using their products.
→There are about 40 additional engagements with prospective customers, indicating a healthy pipeline.
→Not all contracts are in high-volume production; some are in homologation or trial marketing phases.
→The company has multiple contracts with two-wheeler OEMs, including large players like Ola and others with varying volumes.
→They are also negotiating with large Tier-1 customers for export cycles, though visibility remains slow.
→The company tracks the number of contracts and customer engagements rather than a traditional order book due to the variable nature of vehicle launches and volumes.
→Growth visibility relies on customers' vehicle launches and volume ramps rather than fixed orders.

Capex plans

Yes

→The consolidated CAPEX plan for the current year (FY '24) is over ₹50 crores, and they are on track to complete this investment.
→The bulk of the investments will be in new businesses; standalone business CAPEX will mainly be for maintenance.
→FY '25 CAPEX planning is underway but still dynamic; final figures expected in about three months.
→For the SGEM (subsidiary) business, the CAPEX plan was ₹28 crores for FY '24, with about ₹5 crores spent in H1 and the balance expected by March 31.
→Capacity expansion in SGEM is ongoing and on track, aiming to utilize the full planned CAPEX.
→Future CAPEX and investment numbers will be communicated once finalized, given the many "moving pieces" currently affecting planning.

How does Sterling Tools Ltd rank vs peers in Auto Components?

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1Sterling Tools Ltd

Rev 3Mar 3

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